MOBILE, Ala. (WALA) – Managing multiple debts can be overwhelming. Debt consolidation is a popular option for people looking to improve their financial standings. But is it a smart strategy for reducing personal debt? Navigator Credit Union breaks down the pros and cons.
What is debt consolidation?
Debt consolidation involves combining multiple debts into a single loan or payment. This often means one monthly payment and, ideally, a lower interest rate. Consolidation options include personal loans, balance transfer credit cards and home equity loans. Each has its own terms and conditions.
The pros of debt consolidation
One of the primary advantages of debt consolidation is the possibility of getting a lower interest rate on the new loan. This can mean significant savings over time. By consolidating multiple debts into a single monthly payment, you also reduce the risk of missed payments, which could mean a better credit score.
The cons of debt consolidation
While debt consolidation …